This question deals with cost curves and isoprofit curves. Keep in mind that the formula for a firm's cost function is: TC = FC + C(Q) TC → Total Costs: FC → Fixed Costs: C(Q) → Cost of production*Quantity produced → also known as Variable Costs Q2: Firms A and B are two firms supplying producets in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q --- Equation (1) - Firm B: TC = 10 + 2Q --- Equation (2)
This question deals with cost curves and isoprofit curves. Keep in mind that the formula for a firm's cost function is: TC = FC + C(Q) TC → Total Costs: FC → Fixed Costs: C(Q) → Cost of production*Quantity produced → also known as Variable Costs Q2: Firms A and B are two firms supplying producets in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms: - Firm A: TC = 2Q --- Equation (1) - Firm B: TC = 10 + 2Q --- Equation (2)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![This question deals with cost curves and isoprofit curves.
Keep in mind that the formula for a firm's cost function is:
TC = FC+ C(O)
TC → Total Costs:
FC → Fixed Costs:
C(Q) → Cost of production*Quantity produced → also known as Variable Costs
Q2: Firms A and B are two firms supplying products in two separate differentiated goods markets.
Equations (1) and (2) give the total cost functions of the two firms:
- Firm A: TC = 2Q --- Equation (1)
- Firm B: TC = 10 + 2Q --- Equation (2)
Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000.
The cost of production per unit for each firm is $2. Firm B has a fixed cost of $10.
(a) Plot isoprofit curves valuing $34,000 and $60,000 for each of the two firms. Provide an
explanation for any differences that may exist
(b) Use the information given about firms A and B and appropriate diagrams/figures to explain how
the equilibrium for both firms will change if a rival company increases its prices.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9e1123ce-277a-456d-a3a0-ab706dee8fde%2Fe3f386c3-1c34-4931-90a4-cccabeffe3f0%2Fv97jsn_processed.png&w=3840&q=75)
Transcribed Image Text:This question deals with cost curves and isoprofit curves.
Keep in mind that the formula for a firm's cost function is:
TC = FC+ C(O)
TC → Total Costs:
FC → Fixed Costs:
C(Q) → Cost of production*Quantity produced → also known as Variable Costs
Q2: Firms A and B are two firms supplying products in two separate differentiated goods markets.
Equations (1) and (2) give the total cost functions of the two firms:
- Firm A: TC = 2Q --- Equation (1)
- Firm B: TC = 10 + 2Q --- Equation (2)
Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000.
The cost of production per unit for each firm is $2. Firm B has a fixed cost of $10.
(a) Plot isoprofit curves valuing $34,000 and $60,000 for each of the two firms. Provide an
explanation for any differences that may exist
(b) Use the information given about firms A and B and appropriate diagrams/figures to explain how
the equilibrium for both firms will change if a rival company increases its prices.
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